Wednesday, December 26, 2012

How to manage EMI Effectively?

EMI
refers to Equated Monthly Installments a key term in all loan products which
stands for the loan repayments to the bank. The EMI is calculated by taking the
loan amount, Interest Rate and repayment tenure into consideration. All the
Banks and Financial Institutions do the calculations in the same manner so the
amount will not change from one bank to other. All the EMI are calculated on
diminishing rate which is mandatory in Home Loans.

Banks
provide the facility of repaying the loan in Equated Monthly Installments which
is a combination of Principal and Interest Components. The EMI will have
Interest Component higher in the initial stage of tenure and as the tenure goes
on the Principal component increases and the interest component decreases.

The
EMI can be increased if the income of the applicant increases. But the cant be
reduced once it is fixed. If the customer wants to make any part-payments
during the repayment tenure then the paid amount will be directly deducted from
the outstanding principle and tenure will be re-scheduled according to the
latest outstanding amount by keeping the EMI fixed at the same amount. This
provision is available only for the Home loan customers.

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